Zodiac Model Rocketry Company sells model rocketry kits and supplies to retail o
ID: 2480146 • Letter: Z
Question
Zodiac Model Rocketry Company sells model rocketry kits and supplies to retail outlets and through its catalog. Some of the items are manufactured by Zodiac while others are purchased for resale. For the products it manufactures, the company currently bases its selling prices on a product-costing system that accounts for direct material, direct labor, and the associated overhead costs. In addition to these product costs, Zodiac incurs substantial selling costs, and Jack Maxey, the controller, has suggested that these selling costs should be included in the product pricing structure. After studying the costs incurred over the past two years for one of its products, rocket motors, Maxey has selected four categories of selling costs and chosen cost drivers for each of these costs. The selling costs actually incurred during the past year and the cost drivers are as follows: Cost Category Amount Cost Driver Sales commissions $ 570,000 Boxes of rocket motors sold to retail stores Catalogs 208,810 Catalogs distributed Costs of catalog sales 142,400 Rocket motors sold through catalogs Credit and collection 69,300 Number of retail orders Total selling costs $ 990,510
Prepare a schedule showing Zodiac Model Rocketry Company’s total selling cost for each order size and the per-rocket motor selling cost within each order size
An analysis of the previous year’s records produced the following statistics.Explanation / Answer
Cost category Amount$ Cost Driver Cost per driver $ Sales Commission 570,000 Boxes of rocket motors sold to retail stores = 228,000 2.50 Catalogs 208,810 catalogue distributed = 417,620 0.50 Costs of Catalogs sale 142,400 Rocket motors sold through catalogues = 178,000 0.80 Credit and collection 69,300 Number of retail order= 6,300 11.00 Total selling cost 990,510 14.80 Small Medium Large Total $ Retail sales in boxes (12 motors per box) 6,250 116,250 447,500 570,000 (2500*$2.5) (46,500 *$2.5) (179,000 *$2.5) Catalog sales in units (i.e., motors) 64,000 42,400 36,000 142,400 (80,000*$0.8) (53,000*$0.8) (45,000*$0.8) Number of retail orders 5,445 27,115 36,740 69,300 (495*$11) (2,465*$11) (3,340*$11) Catalogs distributed 78,305 58,635 71,870 208,810 (156,610*$0.5) (117,270*$0.5) (143,740*$0.5) Total $ (A) 154,000 244,400 592,110 990,510 No of motors (B) 30,000 558000 2,148,000 2,736,000 (2500*12) (46500*12) (179000*12) Selling Cost per Rocket Motor $ (A/B) 5.13 0.44 0.28
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